Financial Planning for January 2009

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Out With the Old?

Happy New Year!

Welcome to 2009. With the New Year come new challenges and what challenges they are! The economic downturn and recession (or whatever you may want to call it) certainly makes the year ahead a scary one. Unemployment is the highest it has been in years and the stock market has fallen enough to turn even the staunchest of optimists pessimistic.

So, with all the bad news, how could anyone possibly find a silver lining in this cloud? Well, because there is one. The country is embarking on a new period with a new president and even a slow stock market presents opportunities. So what will it be – optimism or pessimism? The choice is yours.

If you’re the upbeat type, let’s talk a little about the year ahead. Probably the biggest question for many of us is what to do with those 401(k) and IRA accounts that lost so much value last year. Should you move to “safe” investments like treasuries and certificates of deposit? That would certainly seem to be a way to cut your losses, but is it the ‘right answer’ for the long haul?

Without seeming to give investment advice, the “smart” money says that now is not the time to be timid. Many financial advisers will tell you that stocks are on sale now and, for good ones, that may be true, but the roller coaster ride we call ‘the market’ is not for the feint of heart. If you are currently in the market with your retirement account - and do not need to withdraw funds - you might want to stay the course or move to stronger stock funds. Regardless of what you choose to do, don’t skimp on 401(k) contributions. Now, more than ever, saving will help both you and the economy.

Does your employer offer a flex plan? If it’s not too late, review your participation and adjust your withholdings as necessary. In connection with that, if your current health plan includes an HSA, take a moment to look at your current contributions. Withholding the maximum can provide you with a nice tax deduction and, if you never use it, a nice way to increase your retirement funds.

Now is a good time to refinance your mortgage. With interest rates at historic lows, you may be able to improve your financial position simply by reworking your existing home mortgage. Be careful, though: this option is good for those who have a strong equity position in their homes, but those with little or no equity may find it hard to refinance. Contact your lender and investigate your options.

While it’s true the year ahead appears to have many challenges, if you look hard, perhaps there are some jewels to uncover in the rough. Before making any rash decisions to throw out your old investments, and financial plans, give us a call and let’s discuss your options.

Have a terrific New Year.


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